The Resources and Energy Quarterly contains the Office of the Chief Economist’s forecasts for the value, volume and price of Australia’s major resources and energy commodity exports.

Each March, the Resources and Energy Quarterly publishes an extended five-year commodity outlook. The annual ‘big picture’ forecast seeks to look beyond immediate issues – e.g., trade tensions, COVID-19 – and considers some of the underlying, longer-term factors which affect commodity markets. As the world continues to urbanise, industrialise, and improve its technology, commodities will continue to play a vital role.

In recent decades, China’s economy witnessed deep industrialisation and an injection of large quantities of iron, steel and coal. The next wave of emerging economies – such as India – could feature relatively less manufacturing and more in services and information technology. Their energy and transport systems may also develop differently. All these trends would add significant opportunities for commodities such as copper, lithium, nickel, LNG, and aluminium.

The latest edition shows Australia’s resources and energy exports are expected to reach $299 billion in 2019–20, before easing back in subsequent years as some of the surprising price gains of recent quarters unwind. However, the possibility remains for new records to be set if prices continue to surprise on the upside.

The classic case here is iron ore, which faced severe supply disruptions following the collapse of the tailings dam at the Brumadinho iron ore mine in Brazil in early 2019. With reduced supply, iron ore prices surged above US$100 a tonne in 2019, but were gradually correcting – until another wave of floods in Brazil and a cyclone in the Pilbara region of Western Australia sent prices spiking again in early 2020. This is leading to a second surge in iron ore export revenue, making it likely that in 2019–20, iron ore will be the first commodity to exceed $100 billion in export earnings over a single year.

However, to credit this earnings boom purely to ‘price growth’ would be to miss decades of careful work, investment, innovation and automation, all of which have driven significant improvements in productivity and scale, placing Australia at the heart of the global iron ore market. Australia now accounts for more than half of all global iron ore exports. This makes Australia crucial to the global economy itself, since steel is a vital input to energy, infrastructure, housing, construction, transportation and all forms of machinery. In addition to its pivotal role across other industries, steel is among the world’s largest industries in its own right.

Another major industry – and similarly critical to the global economy – is gas and oil. Here, too, Australia has become more important over time, emerging as the world’s top exporter of LNG in late 2019. Our exports of coal, gas and uranium make Australia pivotal to global energy markets. And our resources of lithium, copper, nickel and zinc are likely to hold us in good stead for the future.

Unavoidably, the outbreak of COVID-19 (coronavirus) will have some effect on forecasts for this edition. It is assumed that this event will have an impact on Chinese and global GDP in the first half of 2020, with the effects largely playing out by June 2020, though at the time of writing, this remained a rapidly evolving issue.

While near-term factors such as COVID-19 and trade tensions are often the focus of commodity analysis, a look at the bigger picture shows untold potential and a host of new opportunities as development progresses over the longer term in Asia, Africa and South America. Australia’s prospects as a resource and energy commodity exporter continue to remain strong.